On this segment of theRule Breaker Investingpodcast,Motley Fool co-founder David Gardner talks about his decades-long interest in the java giant, which the Fool has had in its portfolios since the late 1990s. And the relationship goes both ways: Schultz later invested in the Fool. But there are a host of reasons why the Fool likes this stock, which exemplifies the criteria by which the Fool choses most of its investments.
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A transcript follows the video.
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This podcast was recorded on Aug. 10, 2016.
DAVID GARDNER:And now I want to shift from Howard back to Starbucks(NASDAQ: SBUX) for just a little bit more thinking. Just a few concluding thoughts this week. More storytelling and thinking than any real organized presentation for you.
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I want to point out that Starbucks is one of those classic examples for us, as investors. Investors, by definition, act for the long term. One of those classic examples of a stock that you should just have kept buying and adding to. And I don't mean to use the past tense because I think you should own it today, and you should just keep buying more over time.
Now, not every business or stock works out that way. But when you have a visionary CEO, and you have a really basic, universal product -- like coffee -- and you have an entity that is capable of delivering on a promise every day, then whether or not you like Starbucks, you have to admit they're very professional. They are very consistent. And for some of us, they're excellent. They are, in Howard Schultz's words, that third place. If your first place is your home and your second is your workplace, Starbucks, for a lot of people, is that third place where they can meet a friend.
And delivering on that promise -- as long as Howard has been doing it with, again, that universal product and that great consumer brand -- are the kinds of companies that we love, as investors. That we should be looking for -- not just in this industry, but in any industry. For a lot of us, I think one of the hardest things to do is to add to a stock that's already gone up.
But I think we need to disabuse ourselves of that. We need to disavow that old bias, and we need to recognize that, usually in life -- and I've certainly said this before in the weeks and months ofRule Breaker Investingpast -- the winners typically keep on winning in this world, and whether we're talking about Howard himself, or Starbucks, it's a very clear example, and by no means a unique example.
Many of the companies -- fromDisneyto a company likePriceline, which has been such a wonderful performer for us inMotley FoolStock Advisor --are really well-managed corporations by good people who just get the job done, time and time again. And again, this is a minority of companies on the public markets, but these are all the ones you should be owning and adding to.
I'm happy to say that we startedMotley FoolStock Advisorin 2002, and it was time to add Starbucks to that portfolio. Then we added it, again, in 2011, and these are just winning positions. So concluding thought No. 1 of three is, keep investing in these types of companies, and I'm speaking specifically about Starbucks, even right now, here today. Even at an $80 billion market cap.
Concluding thought No. 2 is, there were some very painful times to own Starbucks over the last two decades. I already talked aboutThe View, a really bad six weeks that seemed embarrassing for us at the time in the media. But since then, Starbucks has had some horrendous underperformance at different points in the last 20 years, and often it was Howard overreaching. He's a very ambitious person.
Howard, at one point, decided that Starbucks.com could be a major hub. Starbucks has always tried to make music a key part of the experience. You see music you're hearing played in the store [for sale]. Music cards have often been sold in lots of different Starbucks stores. But he's tried to make Starbucks count for a lot more than just a coffee shop.
Sometimes, he's been a little bit political. He's encouraged baristas to open up political conversations with people before -- just part of the social aspect of Starbucks. Howard's also really walked the walk in some surprising ways. I think a lot of us know he's developed a program to help pay for college for some of the baristas at Starbucks, which is a remarkable thing.
I was just reading, at the end of this July, a press release talking about a new Starbucks opening in Kuala Lumpur, Malaysia. What's special about that one? Well, it's a collaborative effort with the Society of Interpreters for the Deaf. It opens its store in Malaysia with 10 deaf partners and three hearing partners -- partners being how they refer to their employees. That's pretty remarkable.
So those kinds of experiences.Panerahas done some special things like that. These are pretty remarkable efforts on the part of the private sector to help change the world in almost a public sector way. In fact, sometimes some of my favorite companies we say have the brains of a for-profit and the heart of a not-for-profit.
I know some people really hate Starbucks -- and I'm sorry if that's you -- but I think Starbucks has really exemplified that more so than most public companies in the United States or the world today, frankly. That's concluding thought No. 2, that Howard has made some major missteps, and you had to sit there and watch the stock get cut in half more than once, over these last couple of decades, to get that eight-bagger that's so far ahead of the market.
And concluding thought No. 3 -- and maybe I'm riffing a little bit off of reflections on last week's podcast, "I Own the Water" with Donald Trump -- is, in a world that's so often, in my experience and in my 50 years, looked to our political leaders for so-called leadership, I will just say, again, probably the Fool in me here, the contrarian, has so often found the greatest leaders in my life from the private sector.
Howard Schultz is a great example of that. Hundreds of communities, like Ferguson, Missouri, need economic development. Their citizens need job training. Their neighborhoods need stability and hope. And what was Starbucks doing recently, but opening up a new Starbucks in Ferguson. "Already a rallying point for more investment," said Dan Bish, Ferguson's community development coordinator. Bish said, "Starbucks was a huge get for us" -- I'm quoting there -- "helping spur investment along the entire corridor. We're saying, 'they're willing to invest in us, so you should invest in us, too.'"
And so I'm just concluding with a thought this week. This is borrowed from one of our great online contributors, whose screen name in the Motley Fool community is CromulentBrad. In a post earlier this year on Starbucks, CromulentBrad said, and I'm quoting: "This is how you ignite economic development in an area desperately in need of it. Progress comes from leaders like Howard Schultz -- people willing to put their money and reputation where their mouth is" -- and this is a little bit of cynicism on the part of my friend Brad -- "not the yammering hammerheads currently clogging our airwaves promising change."
So whatever you might make of that viewpoint, I'll say this. So many of the great leaders -- from Steve Jobs to Howard Schultz to Reed Hastings atNetflixto Bob Iger at Disney, and of course, to Warren Buffett atBerkshire Hathaway-- are people who are making real changes in our world, not through things like foreign policy or economic policy, but through real actions creating jobs, and I think, whether in good or bad neighborhoods, creating success for customers who willingly buy from them. That sounds like leadership for me, and I will always vote for that.
David Gardner owns shares of Netflix, Panera Bread, Priceline Group, Starbucks, and Walt Disney. The Motley Fool owns shares of and recommends Netflix, Panera Bread, Priceline Group, Starbucks, and Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.